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Understanding what the localrealestatemarket is doing is remarkably important for everyone involved. Homebuyers and sellers need to know whether homes in certain price ranges are staying on the market for months — or clearing within days. Realestate firms need to be aware of what’s going on, in order to offer the best advice possible to clients, as well as position themselves properly.

So what should people look for, in order to determine the strength of the market? And what are some of the warning signs that the market is nearing a downturn? To help you find what to look for, nine members of Forbes RealEstate Council share some of the key signs to tell whether or not the localrealestatemarket is heatingup. Here’s what they had to say:

Members discuss key elements to look for in order to determine whether a market is heating up.Photos courtesy of individual members.

1. Absorption Rate

The most important statistic to follow to gauge the strength of the localmarket is the absorption rate. That is, the number of available houses divided by the number of under-contract properties. This calculation provides the number of months it would take to sell off the existing inventory at the current sales rate. The lower the number, the hotter the market is in favor of sellers. If sales are slow, the absorption rate will take many months, and it indicates that it's a buyer's market. - Corey Burr, TTR Sotheby's International Realty

2. Increased Capital Flow

To me, the surest sign that a localrealestatemarket is heatingup is when capital (both debt and equity) flows pick up dramatically without regard to property fundamentals. When lenders and equity investors start taking unwarranted risks for lesser and lesser returns, that is typically the beginning of the end. - Mark Fogel, ACRES Capital

Typically, the frequency of inbound calls will quickly signal that tenants are out in the market looking for space. We don't rely on inbound calls to support our business; however, it's a clear indication that decision-makers are feeling confident about their business and are ready to expand their operations. - Vinny DiMeglio, Colliers International

4. Broker Communication

In order to successfully invest in manufactured housing, you need to keep your finger on the pulse of the market. To do so, it is imperative that you establish relationships with brokers in your target market. Brokers speak to both buyers and sellers on a daily basis, and will be able to shed more light on where prices are trending. - Brian Spear, Sunrise Capital Investors

5. Increased Retail Leasing And Rents

Increased retail leasing activity, increasing rents, and especially new single and multifamily development entering the market are clear signs. The last part is especially important, because developers work on two- to five-year time periods, so if something is under construction, it means a developer believes the market will be better in the coming years. - Paul Darrow, marcusmillichap.com

6. Active Days On Market

The best ways to tell that the realestatemarket is heatingup are active days on market and the prices of realestate. Typically, as a market is starting to heat up you will notice a dramatic decrease in ADOM and prices starting to trend up. In a market that is heatingup, you will observe ADOM dropping to less than 30 days for homes in the market’s median sale price. Prices will begin to trend up typically 3% to 10% per year, and the demand will begin to outpace the supply of homes available on the market. - David Minor, Vesado

If you are in a market with many jobs in the service industry, that can be dangerous when the economy slows down. I want to see a very diversified employment base. Avoid markets that have a high job concentration in a single industry (e.g.: service, oil and gas, etc). Additionally, I want to look into net migration. Are people actually moving in or out of that area? - Carlos Vaz, CONTI Organization

8. Consistency Of Prices

A localrealestatemarket is due for a correction when home prices consistently increase at a rate significantly higher than the average median income for several years. Prices will inevitably fall to a true fair market value if well-employed local citizens are unable to afford living in their market. - Hunter Perry, Compass